OPEC+ agreed its deepest cuts to oil production since the 2020 COVID pandemic at a Vienna meeting on Wednesday, curbing supply in an already tight market despite pressure from the United States and others to pump more.
The cut could spur a recovery in oil prices that have dropped to about $90 from $120 three months ago on fears of a global economic recession, rising U.S. interest rates and a stronger dollar.
The United States had pushed OPEC not to proceed with the cuts, arguing that fundamentals don’t support them, a source familiar with the matter said.
“Higher oil prices, if driven by sizeable production cuts, would likely irritate the Biden Administration ahead of U.S. mid-term elections,” Citi analysts said in a note.
“There could be further political reactions from the U.S., including additional releases of strategic stocks, along with some wildcards including further fostering of a NOPEC bill,” Citi said, referring to a U.S. antitrust bill against OPEC.
JPMorgan also said it expected Washington to put in place counter measures by releasing more oil stocks.
OPEC+ sources said the agreed production cuts of 2 million bpd or 2% of global demand would be made from existing baseline figures